Rupee likely to depreciate in next 6 months: SBP survey

Rupee likely to depreciate in next 6 months: SBP survey

KARACHI: The Pakistani rupee may encounter events of depreciation against the US dollar over the next six-month period. The country, however, remained confident that the actions taken on money laundering and terror-financing would help it in exiting from the Financial Action Task Force’s (FATF) grey-list next month.

“Over the next six months, foreign exchange rate risk, balance of payment pressures, widening fiscal deficit and increase in domestic inflation were reported as key risks,” State Bank of Pakistan (SBP) said in its annual Financial Stability Review (FSR) 2018 launched on Thursday.

“The likelihood of occurrence of a high risk event in Pakistan’s financial system over the short-term is slightly higher than the medium-term,” the central bank said in the perception survey.

The local currency has recovered 2.3% to Rs156.38 to the US dollar compared to fiscal year 2019’s closing at Rs160.05 following slight improvement in the current account deficit and foreign currency reserves.

As many as 92 people participated in the third annual survey. These included executives from commercial banks, insurance companies, exchange companies, financial journalists, members of the academia, SECP officials, and think tanks. The SBP launched the survey the next day the global rating agency Moody’s highlighted similar risk factors in Pakistan’s economy on Wednesday.

“Risk of political uncertainty has subsided after general elections (in July 2018),” the perception survey added. The central bank said that law enforcement agencies are investigating the widest range of terrorism financing activity and that the country will be successful in implementing the action plan agreed with the FATF.

“Pakistan is working to implement the action plan by September 2019 to negotiate an exit from the ‘grey-list’,” the report said.